OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information:
Total assembly fees for part B is
A)$3000
B)$24,000
C)$2700
D)$675

Question

OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.  The following parts were produced in October with the following information:
 Total assembly fees for part B is
A)$3000 
B)$24,000 
C)$2700 
D)$675

Quizplus · Accepted Answer

Since activity-based costing system is used, we need to look at the activity cost pools and cost drivers to determine the total assembly fees for part B.

From the table provided, we know that 20 batches of part B were produced and the activity cost pool for batch setups is $40,000. Therefore, the cost driver rate for batch setups is:
$40,000 / 100 batches = $400 per batch

Next, we look at the number of parts produced in each batch for part B. We know that 10 parts were produced per batch and the activity cost pool for machine setups is $20,000. Therefore, the cost driver rate for machine setups is:
$20,000 / (100 batches x 10 parts per batch) = $20 per part

Using these cost driver rates, we can calculate the total assembly fees for part B as follows:
Total assembly fees = (20 batches x $400 per batch) + (200 parts x $20 per part)
Total assembly fees = $8,000 + $4,000
Total assembly fees = $12,000
Divide $12,000 by the 20 parts produced for part B to get the assembly fee per part: 
$12,000 / 20 parts = $600 per part

However, the question asks for the total assembly fees for part B, not the assembly fee per part. Since 10 parts were produced per batch, we need to multiply the assembly fee per part by 10 to get the total assembly fees per batch, and then multiply that by the number of batches produced:
Total assembly fees for part B = (20 batches x $600 per 10 parts per batch) = $2700.

Therefore, the best choice is C, $2700.

OP Technologies Manufacturing Manufactures Small Parts and Uses an Activity-Based